Deviation Leads to Aggravation

Archive for the ‘wisdom love’ Category

Via Matt Yglesias via Brad DeLong, we find the following chart from one of the UC professor’s lectures:

I did some quick googling, and found the following current statistics for Rwanda (these are based on total population, not households, and many of them are from newspapers, so beware).

Many people separated from us geographically are poor, and we profess to care about them and even pity them. Many people separated from us in time are poor, but we don’t care about them much, despite the fact that our actions can have far more impact on them. This is not the point I’d thought I’d make when I began this post.

Even as I read The Black Swan for the first time, I’ve already read it. I’ve listened to several in-depth interviews with Nicholas Nassim Taleb since the book came out in 2007, and he’s had a recent resurgence in attention as the credit crisis fits his titular metaphor aptly. Despite my familiarity with the main thesis I’m still enjoying the book, just as one might still enjoy slurping down the spiced milk after finishing his Cinnamon Toast Crunch. Indeed, I’ve not come across another book that so completely elucidates (in a far more sophisticated and erudite manner, granted), how I’ve come to think about things generally.

I’m 2/3 of the way through the book and have come across many passages tempting me to blog, but the following will probably be the only one I excerpt (you, yes YOU, should really just read the book). In it, Taleb describes the limitation of making predictions in a complex system by using an example computed by a mathematician named Michael Berry:

If you know a set of basic parameters concerning [a billiard] ball at rest, can compute the resistance of the table (quite elementary), and can gauge the strength of the impact, then it is rather easy to predict what would happen at the first hit. The second impact becomes more complicated, but possible; you need to be more careful about your knowledge of the initial states, and more precision is called for. The problem is that to correctly compute the ninth impact, you need to take into account the gravitational pull of someone standing next to the table (modestly, Berry’s computations use a weight of less than 150 pounds). And to compute the fifty-sixth impact, every single elementary particle in the universe needs to be present in your assumptions! An electron at the edge of the universe, separated from us by 10 billion light-years, must figure in the calculations, since it exerts a meaningful effect on the outcome. Now, consider the additional burden of having to incorporate predictions about where these variables will be in the future. Forecasting the motion of a billiard ball on a pool table requires knowledge of the dynamics of the entire universe, down to every single atom!

(…)

In a dynamical system, where you are considering more than a ball on its own, where trajectories in a way depend on one another, the ability to project into the future is not just reduced, but is subjected to fundamental limitation. (p. 178)

Austrian economists like Hayek used similar reasoning in the early 20th century to critique Soviet-style central planning. One oft-forgotten miracle of prices is that they provide a basis of comparison for completely different things. If I decide to use my $100 for golf lessons, I know exactly what I’m giving up for them: $100 worth of Braeburn apples, Suzie’s babysitting, Tide laundry detergent, Clive Owen’s acting, the neighbor’s stash of dope, the additional interest I would earn in my Citibank savings account, a lecture by Al Gore, Hamburger Kunsthalle tickets, the copyright on Beatles sound recordings, taxi rides from JFK to Manhattan, common stock in a Mumbai start-up, etc. In other words, prices tell me about relative values. In the absence of a price system, the Austrians argued, it would be impossible to ration resources effectively, and even if prices were used, no central planner could ever hope to set them correctly because prices reflect an incomprehensible amount of dispersed knowledge particular to time and place. Just think about the task Mr. Planner would have to face:

Set the price of every resource (including, for example, the time of every person in the economy)

Make sure each price is correct relative to every other price both now and in the future.

Repeat steps 1-2 every second as conditions change.

Could we, like Camus, imagine Mr. Planner happy in his Sisyphean task? And to extend it to Taleb’s point, do we really think anyone could make a certain and accurate forecast of where prices will be in a decade? A year? A day? For that matter, are mypowers of clairvoyance to be trusted?

Happily I can report they are, for after reading the above passage and forming this post in my head I turned the page to find a brief section discussing Hayek; Roma Downey has my undying gratitude.

Economists have many hypotheses to describe how consumers consume. Some suggest we consume based primarily on our current income. Others say we also care greatly about keeping up with the Joneses. Still others allege we decide how to spend money by considering what our financial situation will be from here to eternity.

A key feature of the last one, dubbed the permanent income hypothesis, is that people smooth their consumption. In times of plenty, they will save and use this money and/or debt during times of want. In this way, they can maintain a constant and (for most) gradually improving lifestyle. This hypothesis may or may not be the best one for describing consumption generally, but for my money it’s spot-on in describing how people diet.

I see people as having a set amount of calories they consume on net. Because of smoothed consumption, all dieting does for most is increase volatility without changing that net number. We hear dieters describe this all the time in decidedly moralistic terms: “Yes I can eat that cheesecake because I was good yesterday” or “I was naughty at dinner, so I’d better run a few extra laps tomorrow.” The fact that Activity X burned 1,000 calories doesn’t mean my net calorie intake goes down for the week, it just means now I can treat myself to dessert! There’s nothing wrong with this, but it won’t result in a reduced figure (mmmm, puns).

So if weight loss is the goal, why the self-defeating smoothing? My preferred explanation tastes of Hanson: dieting and exercise is ostensibly about fitness, but it’s really about signaling and self-deception. Going to the gym or using fat-free dressing communicates something about ourselves both to us and other people, and we enjoy this narrative too much to let truth get in the way.

Berlin city officials, summoned by complaints over the noise, found a 60-year-old man sharing his two-room flat with 1,700 budgerigars.

Apparently the man adopted two birds out of loneliness, and when the extended family showed up, he was loath to ruffle any feathers. The article’s author gracefully omits from the story the obvious implication that getting old really, really sucks.

The second article has to do with a creative proposal from the head of the Free Democratic Party (fairly analogous to America’s Libertarian Party, but with more sway):

A Berlin politician has come under fire for suggesting that poor people should be encouraged to catch rats by offering them €1 per dead rodent. The intriguing idea entails some gnawing practical problems and has been called “inhuman and cynical”.

The idea seems to have been inspired by the success of the Pfand in Germany, which has reduced litter by paying out cash for empty plastic bottles. It may well be the case that cash for corpses would not work similarly well, but this doesn’t appear to be the focus of the criticism. Instead, critics complain that it would be inhuman to pay (poor) people to kill rats.

Now, I would not enjoy killing rats for money. Nor would I want to be an owl vomit collector or a septic tank technician (both real jobs). I doubt you’ll find many people who take great joy in unpleasant tasks such as these, but nonetheless do them after having made a calculation that the pay made it worth their while. It may be distasteful that for some some killing rats might be a viable source of income, just like it’s distasteful that some sell blood to make ends meet. But isn’t it rather inhuman to deny them a way to improve their lot just because it’s distasteful to someone in power? You can believe that it’s unjust for people to have to make these decisions in such wealthy societies, but denying people a choice to mask a disagreeable reality helps no one.

If those birds adopted by the lonely pensioner had been bountied rats, after all, he might have been left with something other than a flat covered in poo.

I was pleasantly surprised at the Hayekian flavor of the credited response to the above question. Too many students of economics can construct neat little diagrams and solve consumption functions while missing the truly marvelous insights just beyond the slopes. It’s a good sign that a question written for non-economists manages to bypass these constructions and arrive at the true destination.

Typing in “John Galt” as a write-in for about ten state and local races made my 45-minute wait at the polls worth it yesterday morning. There were also three constitutional amendments for my consideration. Two were about allowing state funds to be invested in equities, and I voted with assurance. The third was about the age of consent in South Carolina, and had nebulous implications. I was ambivalent, but I voted anyway. That was probably a mistake.

When I reviewed and submitted my ballot, the machine beeped at me, alerting me that I had not voted in the presidential race–did I really want to leave that blank?

Yes, Mr. Diebold. Yes I do.

Explaining my vote, or lack thereof, was something I thought might be enjoyable, but it became tiresome and unproductive. A non-vote is ambiguous and slippery. A vote for something says more than a vote against. It offers no tags, categories, or any other meta-data with which my peers can quickly sort me. Staying unaffiliated helps one think better, but I wonder if I’m a staunch individualist merely because I like being an unknown quantity or a contrarian.

I spent a fun evening with a politically homogeneous crowd. When CNN called the election, there were shouts of joy, hugs, and in one case, a near hyperventilation. There was boasting when a certain place, whether precinct or state, was called. People pointed with pride at vote counts reflecting their individual contributions. I peered at the shiny graphics, but my contribution did not reflect back. One cannot count what is not there. I had cast a ballot, but I had not voted.

So great was the room’s joy that it could not be contained by the limits of physical nearness. Calls were made, texts received, statuses updated. We could, we did, we can. The world was alight. The world was paying attention. The world cared.

I drove home and read the thoughts of others. I had trouble putting my own into order. I came upon Camus:

And I felt ready to live it all again too. As if that blind rage had washed me clean, rid me of hope; for the first time, in that night alive with signs and stars, I opened myself to the gentle indifference of the world. Finding it so much like myself — so like a brother, really — I felt that I had been happy and that I was happy again.

On a basic level, government is argued to be justified due to the depravity of mankind. Because we humans have such base instincts, Leviathan is necessary to prevent the war of all against all. And it is indeed hard to imagine any sort of order emerging out of anarchy. Without the correcting hand of government, why would anyone cooperate peaceably? How could we trust each other?

But what also seems obvious, however, is that most rules governing society are derived not from government fiat but rather from the dictates of human incentives borne out of nature and nurture. No government agency inspects the cleanliness of my kitchen, but I don’t think anybody I might invite over for a dinner party fears for their health as a result, for not all constraints on human behavior are written on a piece of paper.

Take marijuana, for example. The stuff’s illegal in the United States and yet as far as I can tell, it’s hardly a problem for buyers to find sellers, agree on a price, and make an exchange without any concern that the transaction is not under the purview of the FDA, the FTC, or any other member of the alphabet soup who are deemed absolutely essential in so many other exchanges. The same is true of any other black market activities, which are prevalent the world over.

Recognizing this doesn’t necessarily argue for anarchy, of course (though I would really like to fly the flag of anarcho-capitalism in front of my house as a subtle show of subversiveness, but it would ironically appear not to be for sale). But what this recognition should do is remind us that in addition to the visible hand of the government, there is a less noticable appendage at work as well.